Nova files for court protection / President fired; firm seeking rehabilitation
The Yomiuri Shimbun
http://www.yomiuri.co.jp/dy/national/20071027TDY01301.htm
Nova Corp., the nation's largest English-language school chain, which has been in financial trouble for months, filed for court protection on Friday under the Corporate Rehabilitation Law and suspended the operation of all its schools.
As of the end of July, debts of the Osaka-based company were estimated at 43.9 billion yen, but with unpaid office rents and salary payments for its employees included, the liabilities in excess of assets are expected to reach tens of billions of yen.
Nova applied for the protection with the Osaka District Court on Friday, and the court appointed Toshiaki Higashibata and Noriaki Takahashi, both lawyers, as administrators.
The company's business condition deteriorated in June after the Economy, Trade and Industry Ministry ordered it to partially suspend its operations, throwing its management into turmoil.
Recently, the company has failed to pay the salaries of teachers and other school officials, and it closed some schools. To avoid confusion and protect its assets from creditors, Nova temporarily shut down all of its 669 schools nationwide.
In an effort to find a sponsor for its rehabilitation, Nova reportedly plans to sound out at least four companies on their intention to become its sponsor.
According to sources close to Nova, the firm is considering starting negotiations with leading distributors Aeon Co. and Marui Co., and major IT firms Yahoo Japan Corp. and Rakuten Inc. Nova is expected to sound out these companies on their interest by the end of this month, the sources said.
The administrators said another company was interested in bailing out the troubled company.
At a press conference Friday afternoon in Osaka, the administrators said they could spend only one month finding a new sponsor due to the firm's deteriorating corporate value. If they fail to find a sponsor within this period, they likely will file for bankruptcy.
Nova's three board members, excluding cofounder Nozomu Sahashi, decided at an extraordinary meeting late Thursday night to dismiss Sahashi, 56, as president and to seek bankruptcy protection.
According to the administrators, more than 300,000 students had paid 40 billion yen in tuition in advance.
Shoichi Watanabe, 54, and two other board members obtained the company's right of representation as of Thursday.
Under the Corporate Rehabilitation Law, repayment of prepaid tuition is ranked below payment of unpaid salary and loans from financial institutions. Therefore, it appears that it will be difficult for students to be fully reimbursed, according to sources familiar with the case.
Nova was cofounded in 1981 in Shinsaibashi, Osaka, by Sahashi and his two non-Japanese business partners. Nova succeeded in drastically boosting the number of its schools by promoting itself through TV commercials that emphasized its schools' convenient locations close to stations, and its corporate mascot Nova Usagi (Nova rabbit).
In 1996, Nova was listed on the over-the-counter stock market, which is now the Jasdaq Securities Exchange.
In 2005, Nova boasted 977 schools and about 500,000 students nationwide, accounting for about 50 percent of the English-language school market in the country.
However, various problems have since emerged over the school's management. For instance, the school refused to refund lesson fees prepaid by students.
After the Economy, Trade and Industry Ministry ordered the company to partially suspend its operations in June, the number of cancellations increased, throwing the company into financial chaos.
Starting in July, the company delayed in paying salaries and stopped paying office rents.
Since September, many schools have been shut down because the firm was unable to secure sufficient native-speaker English-language instructors.
In response to the report, the Jasdaq Securities Exchange in Tokyo suspended trading of Nova shares all day Friday. The Nova stock will be transferred to the supervision post Saturday prior to its delisting on Nov. 27.
(Oct. 27, 2007)
